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Curious Cat Kivans

Investing and Economics Blog

Wow. I have been a believer in Amazon’s long term strategy. Earnings have not been as positive as many expected (over the last few years) but I continued to believe Jeff Bezos’ long term strategy and execution were very positive. I was a bit concerned that present earnings were not better. This quarter the earnings were quite impressive. One quarters numbers are not significant to the long term success. And if earnings were to be less impressive in the coming quarters that would not sour me on the stock. But the good earning are a nice surprise and something that has been made possible through many years of smart moves by Amazon (that reduced short term profits over those years).

Net sales increased 32% to $3.02 billion in the first quarter, compared with $2.28 billion in first quarter 2006. Excluding the $84 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales grew 29% compared with first quarter 2006. Operating income increased 38% to $145 million in the first quarter, compared with $106 million in first quarter 2006.

Net income increased 115% to $111 million in the first quarter, or $0.26 per diluted share, compared with net income of $51 million, or $0.12 per diluted share in first quarter 2006. First quarter 2007 effective tax rate was 23% compared with an effective tax rate of 47% in first quarter 2006.

Google quarterly earnings are amazing again. Google reported revenues of $3.66 billion for the quarter ended March 31, 2007, an increase of 63% compared to the first quarter of 2006 and an increase of 14% compared to the fourth quarter of 2006. 63% jump to $3.66 billion, very impressive and a 64% increase in earnings.

GAAP operating income for the first quarter of 2007 was $1.22 billion, or 33% of revenues. This compares to GAAP operating income of $1.06 billion, or 33% of revenues, in the fourth quarter of 2006. Non-GAAP operating income in the first quarter of 2007 was $1.41 billion, or 38% of revenues. For 2006, GAAP operating income for the first quarter of 2006 was $743 million, or 33% of revenues.

This type of performance is next to impossible to achieve, which makes it amazing they have achieved it but also unlikely it will continue. Still I am happy to own some Google (and glad I have owned it for awhile).

This is the kind of stuff that makes so many people so cynical about how those with the gold make the rules. Somehow unless enough people pay enough attention to stop every single boondogel the politicians seem to keep throwing money at their rich friends. Then those rich friends give a reward the politician’s re-election campaigns for the taxpayer money they received. Traveler taxes awarded to small airports:

The federal government has taken billions of dollars from the taxes and fees paid by airline passengers every time they fly and awarded it to small airports used mainly by private pilots and globe-trotting corporate executives.
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Passengers pay as many as six separate taxes and fees on a single airline ticket, adding up to more than $104 billion since 1997, the AP found. Yet these assessments often are overlooked by the millions who click the “buy” button to purchase tickets online, even though they can exceed 25 percent of the total airfare.
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Congress will decide later this year whether to curtail the huge public subsidy for small airports, while pilots’ associations, airport managers and other interested groups are fighting to keep it.

Any guess on what they will do? I would guess fund their friends and themselves. It is true if the public actually pays attention then I believe they would stop until they think the public won’t notice and then slip the millionaire subsidies back in.

J.T. Wilson Field in Somerset, Ky. got more than $12 million since 2001, much of it through the influence of local Rep. Hal Rogers, a longtime Republican member of the House Appropriations Committee who uses the airfield for trips home. Wilson Field is home base to 26 small planes and one jet. Despite millions in improvements, including a passenger terminal, the airport has yet to see scheduled commercial service.

Personal Loans are either secured of unsecured loans to an individual. Secured loans have some form of collateral such as a car, stocks (margin loan) or a house (home equity loan). Unsecured loans are usually involve less paperwork (which is often an attraction to the borrower – though margin loans often take no paperwork). The interest rate on unsecured loans is normally higher since the lender does not have collateral.

Credit cards are a form of unsecured personal loan. They normally are the worst way to borrow money (though for a very short term loan – say a month or two – when you factor in the ease of use they can be the best option). The problem is many people treat their credit card as a normal source of loans. This is a bad personal finance strategy. See our credit card tips for more information.

Personal loans often have “teaser” rates – interest rates that are low (and quoted in big bold colors) while the real rate is hidden in small type. Don’t fall for the hype. The Annual Percentage Rate (APR) helps you look through the hype to the real cost, but is still not a perfect measure of the cost to the borrower.

Nearly half of all workers saving for retirement have savings that fall short of the $25,000 mark, according to the 2007 Retirement Confidence Survey by the Employee Benefit Research Institute and Matthew Greenwald & Associates. Predictably, the youngest workers (ages 25-34) dominate this group – 68 percent of them have less than $25,000 earmarked for their later years. But so do half of workers age 35 to 44 and a third of workers age 45 to 55 and over.

What is a very rough estimate of what you need? Well obviously factors like a pension, social security payments, age at retirement, home ownership, health insurance, marital status… make a huge difference in the total amount needed. But something in the neighborhood of 10-25 times your desired retirement income is in the ballpark of what most experts recommend. So if you want $50,000 in income you need $500,000 – $1,250,000. Obviously that is difficult to save over a short period of time. The key to retirement saving is consistent, long term commitment to saving.

Workers, he says, are increasingly shackled to their jobs for no reason other than to cling to their employers’ health insurance coverage. These are people, he says, “who don’t leave a job even though they’re unhappy and would be more productive somewhere else.”

This is one of the many problems with the existing health care system in the USA. That system now costs 16% of USA GDP – the highest cost anywhere.

After a decade of working in a job she wanted to leave, Holmes Johnson found the courage to move on. “Starting my own thing was too overwhelming, and my husband’s plan did not offer the coverage to make us feel secure,” she says. A few months ago, she landed a public-relations position with a comparable salary at Washington law firm Sterne Kessler Goldstein Fox. After checking the firm’s formula for prescription-drug coverage, she made the jump. In what other country, she wonders, would that be the deciding factor?

The USA economy has strengths and weaknesses. The strengths have allowed the health care system to function poorly and still be tolerated. It has reached a point where it cannot be tolerated in its current form.

The skeptics also point out that credit spreads for junk bonds are so low today because we’ve had several years of historically low bond default rates. But anyone who’s ever opened up a book on economic history will tell you that most bad loans are made when times are good and the markets are complacent, not when times are bad and Wall Street is full of fear.

The central premise of this post is that risk is being mispriced by the market (by failing to account for the risks bonds… are overpriced). And that when those risks are exposed (for example, as the sub prime crisis builds, recession…) prices will fall. Historically markets do exhibit this pattern – when times are good risks are not fully factored into prices, then those risks are appreciated and prices decline.

C.K. Prahalad on Democratising Commerce: The Challenge for the 21st Century – audio – pdf:

Just the four carriers of cell phone services in India have created a market capitalisation of $75 billion plus in the last five years. So there is a huge opportunity to create economic value for the companies and at the same time getting people to be connected. This connectivity has changed the lives of ordinary people, from taxi drivers to small corner shops, road-side shops, to people who are plumbers and carpenters. All of their business models have changed. Now they can use the cell phone to increase their yields, increase their productivity.
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we cannot have in the 21st century a society which does not pay attention to five billion or 80 per cent of people who do not get the ability to participate in the benefits of globalisation. If we just leave them alone and do not pay attention to them I think it is very hard to maintain both peace and some form of law and order.

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